As most people in and around the HIV community probably know, the viatical settlement industry came into the mainstream as a silver lining of the AIDS pandemic. Viatical settlements existed before, but only on a limited basis.

People with HIV who were looking for creative sources of money helped bring this previously rare financial transaction -- in which life insurance policies are "sold" for a cash settlement -- to people who were living with an assortment of serious illnesses.

In the early days of the pandemic "viators" -- especially those with HIV -- received fairly generous settlements for the sale of their policies. You may know people who received 55 percent or 80 percent of their policy's face amount. The process seemed relatively simple then and usually took about six weeks to complete. Ironically, as social programs and medicine improved what could be done for people with HIV/AIDS, the viatical option became a bit more difficult for the very people for which the industry had burgeoned.

The viatical and life settlement industry became more sophisticated as investors realized that HIV was not a rapid death sentence. These this triggered a "market correction." Soon, settlements took longer (usually about 8-12 weeks now), they typically began to involve more paperwork, an increasing number of policies became unsaleable (due to changing investor guidelines), and the level of investment capital in the market -- necessary to buy policies -- declined.

Increasingly you may encounter folks who now receive lower settlement offers or who may not be able to get a reasonable offer at all. But, in the wake of negative news reports that it is "almost impossible for someone with HIV to viaticate," the good news is that, industry-wide, we are often still able to assist people with HIV with the sale of their life insurance policies. At the very least, we can help someone understand the market, including when it might be best for him or her to viaticate.

An Evolving Market Brings Caution

It is important to understand that the viatical market fluctuates like any other financial market. Sometimes there is ample money in the market -- investors who want to buy certain insurance policies from people with certain ailments -- and sometimes there is very little available money in this market. Unfortunately, "funders" seem particularly fickle when it comes to buying the policies of people with HIV/AIDS.

Some of this comes about because of changing reports on AIDS treatments and the general trend toward improved health of people with HIV. Investors are slower to put their money into a market in which the seriously ill population appears healthier. Because these investors have become smarter about HIV and the continued good health of the people it affects, they see greater risk "investing" in people with the disease.

Some of the uncertainty in the investment community comes in the wake of negative media reports that detail instances of fraud and allegations of other wrongdoing. Yes, some fundraisers have been accused and convicted of bilking legitimate investors out of money that was intended for investment in viaticals.

Similarly, some consumer-viators have resorted to fraud to gain insurance policies or in order to sell policies. But, thus far, the viatical and life settlement industry does not seem to have a higher incidence of wrongdoing than any other financial product or market. Even so, this negative publicity can frighten away investment dollars. It also can make consumers more cautious (which isn't always a bad thing, of course).

Why Would Investors Pay Less?

Because this sensitive transaction is indeed an investment tool (i.e., the inventors are ultimately providing a great service, but they are doing it for a profit), paying less for a policy owned by someone with HIV allows an investor a greater margin of error if the person does not die within the predicted life expectancy. So, if an investor's money is engaged in the transaction longer (because, thank goodness, the viator has thrived), that investor has continued expenses associated with the investment, like the payment of premiums on the still-in-force life insurance policy. And, as mentioned before, because people with HIV are living longer, investment in their life insurance policies is less certain than before.

Still, it's tough to talk about people and their health challenges in terms of business and investment, but such settlements are certainly part of a complex business-financial transaction, just as health insurance and health care are.

Fewer Choices for the Consumer

As a result of changing investment in the settlement market and the increased difficulty of actually performing the core facets of the viatical business, some industry competitors -- both brokers and funders -- have shrunk drastically or disappeared altogether. While this may at first seem to be good news for individual companies in the market, it is bad news for our clients: We all rely on market competition to bid settlements up for our clients; an environment of lessened competition is not necessarily a good thing.

As a broker, we are sometimes challenged with statements like, "We get a lower settlement, but you still get paid." Yes and no. We are paid (by the funding source) based on the actual settlement, so lower settlements mean lower commissions. And, we are only paid for completed settlements, so we frequently work on cases that have to be put on hold, meaning that our time and other resources invested are not recovered.

However, I can tell you that, for our company, and for many of my colleagues in our industry association, we still feel like there is an investment of good will: even if we cannot help someone now, maybe we can help them later. Too, if for some reason it turns out we cannot help one particular client at all, we hope they'll understand the scenario and feel confident enough to let us help their friends.

Where to Go from Here?

So, settlement amounts do tend to be lower nowadays and healthier people usually have to wait longer to qualify for a settlement. But there continues to be investors who buy HIV policies; it's simply a longer process, with the increased frustration of sometimes having to wait until there is money in the market that "matches" your policy.

The best bet is to go ahead and initiate the viatical process if you have determined it may be an option for you. Then, if and when there are appropriate investment dollars in the market, you'll be ready to seize the day.

M. Bryan Freeman has more than 20 years experience in the insurance industry, with 12 of those years focused on viatical settlements. He serves as an officer of the Viatical and Life Settlement Association of America (www.viatical.org) and is active in developing responsible regulation of the industry through the National Association of Insurance Commissioners and the National Conference of Insurance Legislators, as well as through state government channels. He is the founder of Benefits America NA, Inc., and can be reached at mbfreeman@benefitsamerica.com or 404-233-5411.